IBM C20-8060: Document and Accounting Controls

IBM Data Processing Techniques

Document and Accounting Controls

This manual describes major control techniques for tape, RAMAOR) and unit record systems. It is assumed that the reader has an under­standing of data processing equipment.

A number of different control techniques are discussed. These are categorized by those which are established and used inside the data processing installation and those established and used outside the installation. Each technique is explained in terms of what it is and where it might be used.

Controls inside the installation are further discussed by (1) type of proc­essing operation - punching, sorting and merging, summarizing, report preparation, calculation and posting, (2) those which are machine built-in checks and controls, and (3) those which surround the audit trail.

Design

© 1961 by International Business Machines Corporation

Copies of this and other IBM publications can be obtained through IBM Branch Offices. Address comments concerning the contents of this publication to IBM, Technical Publications Department, 112 East Pog: Road, White Plains, N. Y. 10601

Contents

Introduction .......... _ ........................................................................................................... 4

Controls Outside the Data Processing Installation ......... 5 Document Register............................................................................................. 5 Serial Numbering and the Batch Control TickeL .................. 5 Transmittal and Route Slips........................................................................ 6 Cancellation and Time Stamps............................................................... 6 Matching ..................................................................................................................... 8 Control of Factors Subject to Change................................................ 8

Controls Within the Data Processing Installation ......... 9 Control Techniques and Devices ............................................................ 9 Controls on Processing Operations ......................................................... 13 Built-In Checks and Controls ..................................................................... 15 The Audit TraiL .................................................................................................... 15

Making Controls Work .................................................................... _ ................ 18

Contents 3

4

Introduction

The system of checks and balances which accompany the delegation of accounting responsibilities is known as accounting controls. Their purpose is to protect com­pany assets and create a satisfactory audit trail. In so doing they must provide for the documentation of trans­actions and insure that only correct and authorized data enter the accounting operation, that all authorized data is included and processed, and that accounting operations are performed accurately and in the proper sequence. The degree of checking and balancing that is necessary for control depends upon the nature of the application to be processed as well as the equipment and procedures employed in processing it.

Controls are not superimposed on a previously estab­lished procedure. Rather, good controls should be built into and become an integral part of every procedure during the planning phase.

The discussion of accounting controls which follows will be concerned first with those controls established and used outside the data processing installation and secondly with those controls established and used in­side the data processing installation. The theory of good control through the proper separation of duties is applicable in both areas. Accounting control outside the data processing installation consists primarily of the initiation, authorization and verification of source documents which represent accounting transactions. Within the data processing installation, accounting con­trol consists of (1) checking operations, in which tran­scribed transaction data is verified, and (2) balancing operations, which insure the accurate processing of all transaction data.

Generally, the necessity for accounting control in­creases .. with the volume of transactions or documents processed and the complexity of operations performed. A variety of control techniques will be discussed. The techniques to be employed by an organization depend upon individual conditions. It is important that the con­trols which are used always provide a proper balance between their cost and their value. Since a system of accounting controls may be obsoleted by a change in accounting procedure, company policy, company or­ganization and/or data processing equipment, controls should be examined and evaluated periodically.

Controls Outside the Data Processing Installation

Control techniques described in the following text are not necessarily limited in use to a particular applica­tion; they are easily modified for use with different ones.

Document Register

Control of individual documents can be maintained effectively by the preparation of a register on which each document is listed at the point of receipt or origin (see Figure 1). The register should include either a description that is sufficient to identify each document quickly, or a serial identification number. The serial number not only furnishes positive identification and an effective method for later reference, but it also is most easily used at the point of entry or origin. When each document has been completely processed, it is "checked off" or canceled on the register. Uncanceled numbers represent documents which are either in proc­ess or have been mislaid. Intermediate processing oper­ations for each document may be shown on the register, and dated as the document passes that point in the procedure. Figure 1 illustrates a document register for

sales orders. It not only discloses a missing or misplaced document, but it also indicates any delays in process­ing as might be the case with order number 12843, which, several days after its receipt, has not yet been billed.

Serial Numbering and the Batch Control Ticket

Where serial numbers are printed or stamped on each document, rearrangement in serial-number order and a check for missing numbers may be performed during, as well as after, processing to insure inclusion of all documents. This plan is particularly adaptable to docu­ments such as checks or drafts, where each document must be accounted for. When the document is an IBM

card, the serial number may be punched into, as well as printed or interpreted on, the card; then arrange­ment of the documents, as well as a count of and se­quence check for missing documents, may be accom­plished automatically.

Serial numbering may also be used for groups and batches. If so, the quantity or number of documents

ORDER REGISTER MONTH ~

DATE DATE DATE' DATE ORDER NUMBER

AUDITED BILLED SHIPPED REMARKS

RECEIVED

/(J I/y 12831 1 tJ I/y I ~ II II /~ I/~

" 12832 II IP//6 /, //~ II 12833 II II " ,. 12834 /tl / /s /"//Z / I? //,J> II 12835 /,,/Ij/ /,,//~ /4//7 " 12836 " " " " 12837 /() I /.5 /p /17 I"/IP I, 12838 I(J/lj/ " "

" 12839 " /d~er I~L/7 " 12840 II II " (I 12841 1/ /11/16 /fI/17

I (JI /~- 12842 /t7!/,s- /17/17 I~I/,(

" 12843 1.:1//6 :th/~J·Z:-.~~ /I 12844 II ,,, /1 f I() II f

CI

Figure 1. Order Register

Techniques 5

in each batch is recorded, together with the batch serial number, either on the first document or on a separate form accompanying the batch. For large volume opera­tions, batch size should be predetermined for ease and efficiency in handling.

Figure 2 illustrates the use of a batch control ticket which employs a document count as well as document and batch serial numbering. By maintaining a file of the batch control tickets, both the sending and receiv­ing departments can account for all documents.

,,-;:::::.....

,c:::::: ---I

slip (Figure 3) is employed, either in addition to or in combination with the letter of transmittal. The route slip is similar to the batch control ticket shown in Fig­ure 2, except that in this case each department or opera­tional step which the accompanying documents pass through is identified together with an indication of the processing time and the operator or clerk responsible for each job. Responsibility is fixed and the means to effect a degree of work control as well as document con­trol has been incorporated into the same form.

/ 4l ~ 1<ecce/~ p~r. BATC NO TO:

/0 ~3 V DA;( Q

?~ . FROM: ~

V~;e-.

NUMBERED

.17 /,;{3 S"~- I /el~?/ NO. OF DOCUMENTS FROM TO

RECEIVED ATTACHED DOCUMENTS SPECIFIED ABOVE

DATE SIGNATURE

PLEASE SIGN AND FORWARD THE COpy OF THIS BATCH CONTROL TICKET TO SENDING DEPT. WITHOUT DELAY.

Figure 2. Batch Control Ticket

Transmittal and Route Slips

A letter of transmittal describing a group or batch of documents is frequently employed to establish control and transfer responsibility when documents move from one department or location to another. The transmittal slip is usually a printed form with spaces to indicate the variable information for the batch (see Figure 3) .

When the volume of work or the number of people who may perform any given operation is large, it may be desirable to fix responsibility and account for docu­ments passed from each operation to the next as well as from one department to another. In this case, a route

6

Cancellation and Time Stamps

As a document is received at a control point or passed through a given department, it may be "canceled" by a stamp to indicate that it has reached or passed through a certain stage in its processing. Any clerk or operator handling documents would automatically reject or re­turn for checking any document not bearing the cor­rect cancellation. The use of the time stamp for can­cellation affords, in addition to document control, a method of achieving work time or production control, since it furnishes an accurate, unalterable record of elapsed time for handling (Figure 4).

CARD SHIPMENT TRANSMITTAL

TO LOCAT~~ ~IOEPT. 4-/R INDIVIDUAL J.I. un~

REPORT NAM~/R ~

REPORT CODE V

IBOX NO OF.2, B 003::2., / CONTROL TOTALS

4000~

;1:<'5; 64:3.2,1

Figure 3. Transmittal and Route Slips

PURCHASE ORDER

NEW MEXICO COMPANY

PROM

LOCA~",J:,AO?f,Vif1&. TOEPT. /17k' IN~CUAL D. X~ ROUTING

NUMBERED

'I'ii /0/1,6 17 JJ..I I I 7 J yS-- ~S-BATCH NO. DATE FROM TO NO. OF DOCUMENTS

DEPT. TO DATE FWD. INITIALS REMARKS

IJ~ (Jj)~. ~ /"/16 ~'t ...

4.\~~Qe,. (0\ \~ Tl~

OIutW /"/616 ~.R. tl-17~#~ -tv ,U.A.A. ",,/.

.-

EXPLAIN ANY DIffERENCES IN NO. or DOCUMENTS fORWARDED AND

RETURN TO CONTROL

SHOW OUR ORDER NO. ON ALL INVOICES. PACKAGES AND SHIPPING PAPERS.

CLERK

REQ. 56 HOUSTON. TEXAS

DATE 10/12 ORDER No. 311 TO

r GENERAL MANUFAC'lURING CCMPANY

ENDICO'IT, N. Y.

L SHIP

TO ABDVE VIA BEST WAY QUANTITY

40 SQUARE SHANK SWIVEL 75 FLAT TOP RIGID 5 En' SHANK \llTH :aRK 2 :BOL1' AND NUT SHANK 4 RND SPR RnG STm

40 BOLT AND NUT SHANK

NOTIfY OUT., O~D. IY OUT. I on. TO OUT. AP,ROPRIATION I

Figure 4. Time Stamp Cancellation

MAIL INVOICES IN TRIPLICATE UNLESS OTHERWISE SPECIFIED.

r.O.B.

DESCRIPTION

CLASS I

PRICE

11202 13102 0 11203

~ 32105 44104 62110 ~

-0 ~

" l> 3

to I

COOl

SUBJECT TO THE TERMS AND CONDITIONS ON THE BACK HUEO' WHICH ARE INco~~ouno AND MADE A ~UT HUED'

:c m C":I m S z m c m ~ ~ 3: m Z ~

SLIP

Techniques 7

Matching

The reassembly and matching of duplicate documents can be used to effect control. This technique is partic­ularly useful when multiple copies are prepared, as with carbon copies, and each copy is then used to prepare records at a different location, e.g., purchasing depart­ment and receiving department. When all copies are reassembled and matched at the predetermined point, the presence of all copies indicates complete process­ing. If the documents are punched cards, matching and checking can be done automatically.

EMPLOYEE'S AUTHORIZATION FOR PAYROLL DEDUCTION

TO BE REGISTERED IN THE ~

REGISTRATION DATA FOR .~ OUT Tj 0 HN D. DoE. .. lit. '''IIIIT ItYIEN N ... MIE. M.DDLIE INITIAL .NO SU"N,

U.S. SAVINGS BOND

Control of Factors Subiect to Change

Factors used for calculations and processing must be reviewed and changed from time to time. Examples of such factors are discounts, selling prices, credit limits, commission percentages, and inventory reorder levels.

Controls must be established which allow only au­thorized changes to be made. This is accomplished by requiring a signature with each request for change (see Figure 5). Changes are documented by printing a reg­ister (Figure 6). A copy of the report is routed back to the initiating department for review and approval.

515/'-I u

TO: Machine Accounting Dept. DATE: 11/25 A NVWUE.R,E.

CITY. ZONE AND nAn

CQMPLETETHISSECTIONONLY WHfN eOND DEDUCTION IS NEW 0" .. [.IIT ..... TIOIII OR AOORUSIS TOlf.CHAHGED.

FROM: Marketing

THE FOLLOWING PRICE CHANGES SHOULD BE MADE:

ITEM NO. DESCRIPTION NEW PRICE

12 2685 PEA SOUP $ 6.001 12 3074 ORANGE JUICE 3.857 13 1111 HAND SOAP 2.200 13 2954 CONDENSED MILK 1.639 13 4182 TOOTH PICKS .353

AUTHORIZED SIGNATURE

Figure 5. Change Authorizations

8

CHANGE REGISTER

FACTOR FACTOR DATE ITEM CODE DESCRIPTION BEFORE AFTER

CHANGE CHANGE

11-26 12 2685 PEA SOUP 5.956 6.001 12 3074 ORANGE JUICE 3.132 3.857 13 1111 HAND SOAP 2.253 2.200 13 2954 CONDENSED MILK 1.652 1. 639 13 4182 TOOTH PICKS .352 .353

----.. ----- -.....~ - ---.... _.-1.... -...- - ".- . -Figure 6. Change Register

Controls Within the Data Processing Installation

Controls within the data processing installation should insure that all transactions are processed completely and accurately. The series of checks and balances which make up these controls must begin with the entry of transactions into the data processing installation and continue throughout processing.

Control Techniques and Devices

There follows a list of control devices and techniques, many of which can be incorporated into the procedure for any data processing system-unit record, tape or RAMAC®.

Serial Numbering: The serial numbering of orders, in­voices, checks, etc., provides control while the data is in transit. Each item or document in the series or group is assigned a successive number; an indication of the beginning and ending numbers accompanies the group.

Batching with a Document or Item Count: In batching data with a document or an item count, the items or documents are counted instead of numbered; an in­dication of the count accompanies the group. This technique can be used to control data both before and after it is punched into cards, e.g., requisitions, changes, receiving reports and punched cards for various analysis reports.

Batching with a Control Total: In batching with a con­trol total, some data field that is common to all items or documents is accumulated for the control total which then becomes the basis for balancing opera­tions during processing. The control field may be an amount, a quantity, an item code, an account num­ber, etc.; totals based upon an account number or

code are known as "'hash" totals. An advantage of this technique is that balancing can often be performed during regular machine processing operations at no extra cost in time.

The IBM 56 Verifier: The IBM 56 Verifier is used to check and verify card punching before the cards are processed in another operation. Verification is very similar to a card-punching operation. Cards which have been punched are fed into the 56; the operator, using the original source documents from which the cards were punched, rekeys the data for each card. The 56 compares what is keyed against what is al­ready punched into the card. When a discrepancy arises, the keyboard locks and the operator is re­quired to rekey the character three times before an error condition is established.

Self-Checking Number Device: The Self-Checking Number Device is a device for the IBM 24 Card Punch and 26 Printing Card Punch that makes it possible to automatically verify the coding, and the punching of codes, in one operation. To use it, each code must have a check digit; this is calculated and recorded with the code. During punching, the device auto­matically recalculates the check digit and compares it against the one that the operator keys; if they do not agree, a 12 is punched automatically over the units position of that field and the keyboard locks. (For additional information on the device see Self­Checking Number Device for Type 24-26 Card Punches, form no. 224-6022.)

IBM 101 Electronic Statistical Machine: As an aid in balancing transaction cards and editing program load cards after they have been punched, the IBM 101

Techniques 9

Electronic Statistical Machine will perform the fol­lowing functions: count cards, accumulate an amount from each card and print the total for batch balanc­ing, sequence-check the cards, sort them, check for consecutive numbering, and perform double punch and blank column detection.

IBM 108 Card Proving Machine: Similar in application to the 101 but with greater speed, the 108 Card Prov­ing Machine can be wired to: • Edit cards for special characters, double punches, blank columns, field sign, code validity and proper sequence. • Examine a particular card field to determine that the data in it falls within a specified range. • Accumulate an amount from each card and bal­ance the total against a predetermined one found in the last card.

Dual Recordings: The dual recording of critical data makes it possible to machine-compare the two for verification. It is more commonly used in mark-sense recording operations and those card punch opera­tions in which it is necessary to verify only one or two fields.

Cross/ooting: Crossfooting is the addition and/or sub­traction of factors in a horizontal spread to prove processing accuracy. It can be used on a payroll reg­ister (Figure 7) to prove that the final totals of net pay and deductions equal the final total earnings; this pro­vides control on report preparation as well as calculat­ing and card-punching operations. In posting transac­tions to records that are stored in a computer (e.g., accounts receivable), crossfooting is used to prove the accuracy of posting either as each transaction is posted, or collectively at the end of the run, or both.

PAYROLL REGISTER

L.OC. NAME

TAX ~

EMRI W/H n. TOT. CY.OR MISC. NET CK. W I YEAR TO DATE

CL.. 0 NO. EARN. W/HOL.D

EARN. TAX ST.TX F .I.C.A. DED. PAY NO.

I r T T I 1 1

1~20 I I I

4 85556STEWART JD 10~00 1150 I I

I I

83130 3 294000 33960 1 I ~OO 66173 4245 562GRAHAM EW 77:77 l~OO 1117 I I 1 ' 200104 33060 1 I

1 I 63:60 66174 \73

I 4 35 564GUERRA TB 48:72 ~20 1 I 1 1 145542 20040 I I I I 40:79 66175 1 4 05 574BOSWELL HL 110:00 1~20 1165 I , 3 330000 42680 , , I I 9~'J.5 66176 I 4235 612HUMPHREY T 76:47 12\60 1i15

I 1 , 62172 1 191712 31380 I I I I 66177

4235 R>45SIMMS C 75:82 10100 1:14

, I ,

64~8 2 200319 26900 I I I I 66178 4235 1709ASHWORTH ~60

1 I VC 67102 1101 , 3 187535 16500 I I

60:41 66179 I I I I 4235 749ROBERTSON WD 77127 1 2180 1:1 6 I I 1 __ 120647 I' I 63131 66180 19480·~_ 1 ~_ 1....".. --..~ - -- --'----.:.....- - 1

6 80046 I I , 47b9

I I 7 11 060COBB JR CS 288:47 I

I I I 576940 94780 , 1 1 I

7151 062NORBERG R 46:00 9:20 :46 '69 , 91875 18380 I I , 1 , I I

5498470 I

328~9 11:35 27:77 5:96 746920 2405179

(2,405.79 = 328.99 + 11. 35 + 27. 77 + 5 .96 + 2,031. 72)

Figure 7. Crossfooting a Payroll Register

10

Total Transfer: Total transfer is used during report preparation when more than one class of totals (minor, intermediate and major) are accumulated. If the cards are in sequence, it insures that minor and intermediate totals are COlTect if the major total is correct. In performing total transfer, only the minor total is accumulated directly from the card field; the intermediate total is an accumulation of minor totals and the major total an accumulation of intermediate totals.

Zero Balancing: Zero balancing is an effective method of verification when both detail items (e.g., accounts payable distribution cards or records) and their sum­mary (e.g., an accounts payable disbursement card or record) are processed together. Each detail item is accumulated minus and the summary plus. The result is a zero balance if both are correct. Figure 8 illustrates the use of zero balancing on a report; nothing prints beside the asterisk in the GROSS column since each group zero-balanced when the counter was cleared.

Parallel Balancing: Parallel balancing, another method of verification when both detail items and their sum­mary are processed together, is illustrated also in Fig­ure 8, in the column titled NET. During printing, each amount read from an item card is added into a counter; amount read from the discount card is sub­tracted. The difference is printed below the net amount read and printed from the summary card. Discrepancies are revealed by a visual check of the column.

Double Punch and Blank Column Detection: Double Punch and Blank Column Detection is a feature avail­able on certain machines which perform punching. It is frequently used after punching to check numer­ical mark-sense fields for any columns which were poorly marked or double-marked. In summary-punch and gang-punch operations it can be used to recog­nize any multiple punching or lacing which might occur in numerical fields. Its use does not require a separate pass. This feature also permits some check­ing of alphabetic fields.

Double or Reverse Calculation: Double or reverse cal­culation is the calculation, recalculation and then comparison of the two results to prove accuracy. It is commonly used in payroll and other calculations for which no predetermined control total can be devel­oped. In the recalculation, factors are reversed-the original multiplier becomes the multiplicand and the original multiplicand becomes the multiplier. When processing with unit record equipment, if the recal­culation is performed in a separate run, then punch­ing of the result can also be verified.

Overflow Check: Overflow check, a feature associated with arithmetic operations, is a means of immediately recognizing results which exceed the capacity of the counter or accumulator in which they are developed. In order to recognize an overflow and associate it with the proper calculation, the check should be per­formed immediately after the arithmetic operation. A machine or system which employs this feature can be programmed to detect and signal the condition.

ACCOUNTS PAYABLE REGISTER

ENTRY INY. VENDOR INVOICE VOUCHER ACCOUNT DEPT JOB DATE

DATE DATE VENDOft NAME NO. NUMBER NUMBER ENTRY NUMBER NO. NO. PAID DUE GROSS DISCOUNT NET

8/31 812E TIDE CHEM 74292 2048 12162 30 412 530 72 4253 9/04 $ 66.95- $ $ 8/31 8/2E TIDE CHEM 74292 2048 12162 30 211 9/04 66.95 1. 34 65.61

<I 1.34 * 65.61 * 8/31 8/2E W B ARCHER 91004 12163 33 411 863 934 8131 41.20-8/31 8/2E W B ARCHER 91004 12163 33 411 862 934 8/31 33.05-8/31 8/2E W B ARCHER 91004 12163 33 211 8/31 74.25 74.25

* " 74.25 * 8/31 812E EL PRINT CO 29542 120675 12164 30 913 741 43 4756 9/04 625.00-8/31 8/2E EL PRINT CO 29542 120675 12164 30 913 740 43 4756 9/04 11. 93-8/31 8/2E EL PRINT CO 29542 120675 12164 30 211 9/04 636.93 12.74 624.19

* 12.74 * 624.19 * 8/31 8/2E TRI CIT GL 78009 MFl 718 12165 30 123 330 9/04 105.56-8/31 8/2 TRI CIT GL 78009 MFl 718 12165 30 123 335 9/04 12.79-8/31 8/2E TRI CIT GL 78009 MF1718 12165 30 123 340 9/04 112.34-8131 8/2E TRI CIT Gl 78009 MFl 718 12165 30 123 355 9/04 593.98-8/31 8/2E TRI CIT GL 78009 MFl718 12165 30 211 9/04 824.67 17.16 807.51

* 17.16 if 807.51 * 8/31 8/2E MASK SUPP 36512 421 12166 30 123 360 9/04 13.10-8/31 8/ZE MASK SUPP 36512 421 12166 30 124 405 9/04 61.75-8/31 8/2E I'1ASK SUPP 36512 421 12166 30 124 410 9/04 63.50-8/31 8/28 ~ASK SUPP 36512 421 12166 30 211 9/04 138.35 2.77 135.58

* 2.77 * 135.58 *

Figure 8. Zero Balancing and Parallel Balancing

Techniques 11

Sign Check: It is possible to detect a change in sign dur­ing arithmetic operations and either stop the machine or signal the condition for subsequent review. In payroll applications, the sign check is used to indi­cate the condition in which deductions exceed gross pay; in accounts receivable, accounts payable, in­ventory and general ledger applications it can be used to recognize any balance which becomes nega­tive.

Blank Transmission Test: This feature allows the check­ing of any data field for all blank positions. As a com­puter control, it can be used to prevent the destruc­tion of existing records in storage, indicate when the last item from a spread card has been processed, skip calculation if a rate or factor field is blank, etc.

Use of Proof Factor in Multiplication: The proof factor in multiplication is a group type control and is there­fore used to verify a number of calculations in one operation. In using this technique, it is necessary that the proof factor be larger than anyone of the multi­pliers with which it is used. During each multiplica­tion, the multiplicand is multiplied once by the mul­tiplier and again by a factor which is the difference between the multiplier and the proof factor. A total of these products and a total of the multiplicands are accumulated for the run or group. At the end, the total of multiplicands is multiplied by the proof fac­tor and the result is compared against the final total of the products. An example follows:

Multiplications to be performed:

1. 4x7 2. 8x9 Proof Factor: 10 Multiplications: 1. 4x7 = 28; (proof 1) 6x7 = 42 2. 8x9 = 72; (proof 2) 2x9 = 18 Total of Multiplicands:

7 9

16

Total of Products 28 42 72 18

Proof: 10xI6 = 160 H EQUAL H 160

Reasonableness Tests: Reasonableness tests provide a means of detecting a gross error in calculation or, while posting to an account, a balance that exceeds a predetermined limit. Typical examples include pay­roll calculations and credit limit checks in accounts receivable. In some cases both an upper and a lower' limit are established; each result then is machine­compared against both limits to make certain that it falls between the two.

12

Comparing: Comparing, as a control technique, per­mits data fields to be machine-checked against each other to prove the accuracy of matching, merging, coding, balancing, reproducing, gang punching, rec­ord selection from magnetic drum, disk and tape storage. In wired control panel machines this is ac­complished with comparing magnets and in a stored program machine it is accomplished with a compare instruction.

Sequence Checking: A sequence check is used to prove that a set of data is arranged in either ascending or descending order before it is processed. It is gen­erally a mechanized operation and may be performed in a separate machine run or simultaneously with another operation in one run.

Matching: The matching technique is generally used to verify coding. Individual codes are machine-com­pared against a group of master codes to select any which are invalid.

Recording Purge and Entry Dates: Purge and entry dates may be recorded in punched cards as well as on magnetic tape and disk storage records. A purge date is used to prevent the deletion of data prior to a certain date. An entry date'is used to categorize a transaction time­wise, and thus provide a means of tracing the trans­action as far back as the original source document for answering inquiries or initiating corrective action.

Tape Labels (Leader and Trailer Records): A tape label appears on each reel of magnetic tape in the form of a leader and/or a trailer record; its contents will'be determined to some extent by the application and the type of data found on the tape. ,The leader record appears as the first and the trailer record as the last on the tape. Together they provide the means for machine-performed accounting control of tape operations. Types of information which may be in­cluded in a tape label are: a name or code for the tape which identifies the application and tape data type, reel number or sequence number if there is more than one, frequency of use, record format, date of preparation or date last used, purge date, opera­tion in which the tape was written (generally a code), name of individual chiefly responsible, output number if there are several tapes, record count, con­trol totals, any instructions to be typed out to the operator as well as an end-of-reel or end-of-file code.

End-of-Tape or End-of-File Routines: Such a routine is part of a tape system's program and is executed when the last record on a reel has been read and processed. It should update the control totals found in the tape label or trailer record, balance and record the record count and any other control totals, rewind the tape, perform any necessary instruction modification, and

type from the console typewriter a message indicat­ing status of the run and instructing the operator in any further machine setup operations.

Checkpoint and Restart Procedures: Checkpoint and restart procedures, which are techniques associated with computers, make it possible, in the event of an error or interruption, to continue processing from the last checkpoint rather than from the beginning of the run. These techniques are included in applications which require many hours of processing time, since heavy machine scheduling and deadlines generally do not permit a complete rerun. To establish checkpoints, processing intervals are determined, each being based upon a certain num­ber of items, transactions or records processed. At each interval or checkpoint, the stored program iden­tifies input and output records and then records them along with the contents of important storage areas such as counters and registers; at the same time, ac­curacy of processing up to that point is established. Restart procedures are the means by which process­ing is continued after an error or interruption. Each set of restart procedures includes the necessary oper­ator and stored-program instructions for (1) locating the last checkpoint, (2) readying the machine for reprocessing, and (3) entering the main routine at that point.

Procedural and Exception Tests: Procedural and excep­tion tests are designed to check machine control and operation before processing. They consist of test data (generally punched into cards) covering all or most conditions which can arise during the run, as well as a control panel and/or program which will process the test data and check out machine components. The control panel is inserted, or the program loaded, or both; the test data is then read into the machine and processed. The results are compared against pre­determined ones. If they are satisfactory, actual proc­essing can begin. In some installations these tests are made only at the beginning of each working day; in others they are made before specific runs.

Error Routine: An error routine provides a means of automatically initiating corrective action when errors occur such as TAPE READ AND WRITE or DISK SEEK, READ

AND WRITE. It is executed after the programmed check establishes an error. The error routine should cause the operation to be performed at least one more time (in some cases several). If the error persists, processing is inter­rupted and the condition is signaled on the console. The operator's instruction manual should include procedures for correction and resumption of proc­essing.

Sampling: Sampling provides a random method of checking and control. In using it, a transaction or item is selected and the processing that it undergoes is checked in detail. This provides an indication of ac­curate and complete processing.

Analytical Comparison of Present and Past Perform­ance: Analytical comparisons are based primarily upon experience, past performance and a knowledge of trends which have intervened. By knowing status as of a certain time and observing trends since that time, it is possible to determine to some degree whether or not present records represent a complete and accurate picture. For example, present period payroll is often compared against last period payroll to spot any questionable variations.

Controls On Processing Operations

The number of available techniques indicates the need for a thorough study of the application and equipment in order to come up with a system of controls which is adequate but which does not overcontrol and delay processing. In so doing, it is desirable to mechanize as many controls as possible. Mechanized controls are al­ways performed at a constant, rapid speed; manual ones are not.

A study of the application will reveal: • How closely the application is to be controlled. • Points in the procedure at which controls must be

placed. • The correcting and restart procedures to be em­

ployed at each point, should the operation not bal­ance. If the procedure is a manual one, it should be clearly documented for operator reference and training purposes.

• How accounting control responsibilities are to be divided.

A study of the equipment to be used for processing will reveal:

• The control techniques which are most suitable. • Those controls which can be mechanized by con­

trol panel wiring or stored programming and the extent.

• The built-in controls that are available on the equipment.

The basis for control during processing must be established as data enters the installation. This is gen­erally done when transactions are edited and may con­sist of assigning a system of serial numbers or develop­ing a document count, a transaction count, an item count, a tape listing and total of some field such as quantity, amount, or code, etc., or a combination of these. When these preliminaries are taken care of, the transactions are ready for processing.

There follows a discussion of some control techniques which can be used in certain processing operations. The

Operations 13

reader will, no doubt, discover others.

Card Punching: For card punching a number of tech­niques are available. The Self-Checking Number Device can be used to verify certain code punching on the IBM 24 or 26. With the 56 Verifier it is possible to verify any portion or all of the 24-26 punching di­rectly from the original document. The IBM 101 Elec­tronic Statistical Machine and the 108 Card Prov­ing Machine are useful for edit or validity checking as well as for balancing and sorting operations. Card reproduction and gang punching can be verified by the use of comparing magnets to compare the orig­inal data against the re-created data; the Double Punch Blank Column Detection device can be em­ployed for additional control on these operations.

Sorting and Merging: The use of the Card Counting Device during sorting will indicate any missing cards if the operator has a card count to which he can bal­ance. The accuracy of sorting or merging can be verified by a sequence check on the collator or a visual sequence check of the data when a report is printed. Control of magnetic tape sorting is accomplished by the stored program; in each pass the sum of the control totals from incoming tapes is balanced against the sum of those developed for the outgoing tape or tapes. On the final pass, sequence is verified.

Summarizing: For control of operations in which data is summarized and then recorded in summary form, a final total of a key field or fields can be accumulated from the summarized data and balanced to one ac­cumulated from the detail data. In card-to-card and tape-to-card summary runs the summary cards them­selves may be tabulated for the final totals. For card­to-tape and tape-to-tape runs, the stored program should develop the necessary final totals of the sum­mary data when it is recorded on the output tape; it should also balance it at the end of the run to a con­trol total read from a control card or the tape label.

Report Preparation: During report preparation, the primary control objective is proving that all items (accounts or transactions, etc.) are included in the processing and that arithmetic is performed accu­rately. It can be assumed that the data itself is cor­rect since punching, summary and posting opera­tions should be proved when they occur.

14

To insure the inclusion of all items in the report, a final control total is developed during processing and balanced at the end of the run to a predetermined one. In cycle billing operations, the control may be an account number JIash total of those accounts which are in the cycle; for other reporting operations it may be a control total based upon an amount, a quantity, or another code field. For control of arithmetic func-

tions which occur during report preparation the fol­lowing techniques should be investigated: crossfoot­ing, total transfer, zero balancing, parallel balancing, reasonableness tests, or a combination of these.

Calculations: In some applications, calculations are verified in the same pass in which they are per­formed; in others, verification requires a separate pass. This will affect the selection of controls. Some suggested techniques for verification are crossfoot­ing, zero balancing, double or reverse calculation, overflow check, use of a proof factor, double punch blank column detection if it is available, and the rea­sonableness test, particularly for payroll calculations. If, in a computer, one or several factors are selected from tables in disk storage, the stored program may include instructions which compare the address or code recorded with the table against the one used to locate it; this insures selection of the proper table.

Posting to Balance-Forward Accounts: The manner in which posting controls are incorporated in a RAMAC

system differs from that in which they are incorpo­rated in a magnetic tape or punched card system. Regardless of system, a crossfoot operation is an effective control when total debits, total credits and a balance-forward amount are maintained in each account; total debits and total credits can be cross­footed to prove that the difference equals the balance forward. For discussion purposes, assume an accounts receivable application. In posting to accounts in disk storage, the stored program must select for each transaction the proper account record, read it into a working storage area, update it there, and, if posting is correct, write it back in the same disk storage location; in the final phase of posting the old account record is replaced by the updated one. The accuracy of posting should be proved between the last two steps; this is the last point at which the old account record is still available. For proof, total debits and total credits are crossfooted and the net result compared to the new balance-forward amount; they should be equal. If they are not, the last step is skipped and the updated record is not returned to disk storage until the error is corrected. For those records that balance and are returned to disk storage, a built-in machine check insures that each is recorded correctly. To insure selection of the proper account record from disk storage, the address or account number recorded in disk storage should be compared by the stored program against the one used to select it. In order to prove that all transactions have been posted, the stored program should accumulate during the run a control total which is balanced to a predeter-

mined one at the end of the run. The control may be based upon a transaction count, an item count or an accumulated total of a quantity field, an amount field, or a code field, etc. In posting transactions to accounts maintained in a punched card file or on magnetic tape, the accuracy of posting can be proved in a single operation at the end of the run or at periodic checkpoints during long runs. It is possible to wait until the end because the original account data is not destroyed during post­ing. In the first case it is available from the old bal­ance-forward cards; in the latter it is available from the input tape. Control is accomplished by accumulat­ing a final total of debits, credits, and the balance­forward amount during the run. At the end of the run, total debits and total credits are crossfooted manually or automatically; the difference should equal the final total of balance-forward amounts.

Built-In Checks and Controls

Built-in checks should be taken advantage of and not duplicated by wired, programmed or manual controls. They function as a result of internal machine circuitry and are, therefore, performed automatically. Some of these checks are common to all machines. For example, all machines have checks which stop the machine for a timing error, a blown fuse, or an operation that is im­possible or in conflict with another.

The IBM 407 Accounting Machine has an echo check which automatically stops the machine if the print wheels are set up to print a total that differs from the one appearing in the counter. The 602 Calculating Punch will stop before punchmg if skip stops are not set properly in the skip bar. The 604 Electronic Cal­culating punch automatically stops and indicates an unfinished program condition if all program steps are not executed in the time allotted.

Computers utilize input/output checks, instruction checks and parity checks. The input check insures that all data is read and coded correctly into machine lan­guage; the output check insures that the output char­acters are correctly set up for punching and printing. The instruction check permits the execution of only those instructions having a valid operation code and instruction format. The parity check verifies each character in the computer on the basis of an odd or even bit configuration. To insure accuracy in disk storage write operations, internal circuitry automati­cally compares the written record against the one from which it was written or requires that a compare in­struction doing this be executed before another disk storage operation. In magnetic tape operations each character and each channel within a record must pass a validity check for an odd or even number of bits; the system determines whether the bit count is odd or even.

This prevents loss of data. The 729 and 7330 tape units utilize a two-gap head so that validity checking is performed immediately after writing.

This discussion does not include all built-in checks; for more information regarding a specific piece of equipment, refer to the reference manual describing the machine.

The Audit Trail

An audit trail must be incorporated into every proce­dure; provision for it should be made early so that it becomes an integral part. In creating an audit trail it is necessary to provide:

1. Transaction documentation which is detailed enough to permit the association of anyone with its original source document.

2. A system of accounting controls which proves that all transactions have been processed and that account­ing records are in balance.

3. Documentation from which any transaction can be re-created and its processing continued, should that transaction be misplaced or destroyed at some point in the procedure.

Figure 9 illustrates an audit trail which might be found in an accounts receivable application. The orig­inal or entry sales register is prepared by date of entry immediately after the cards have been punched or activated from a file. For a tape or RAMAC system, preparation of this report would probably be an off-l~e operation. All punched information is listed on the register in detail, so that if a transaction has to be re­created at some later time, reference to the source document will not be necessary. To prove the accuracy of the register's preparation, its final total is balanced to a predetermined one; if they are equal, the final total is also posted to the control sheet. It is the sum of these individual totals on the control sheet which establishes the final control total to which all accounts receivable operations for the period must balance.

Cards for the cash receipts book are either punched or activated from a holding file. After being prepared in detail, the cash receipts book is balanced to a pre­determined total. If it is in balance, the final total from it is posted to the control sheet and the receipts are posted to accounts receivable. (For a tape or RAMAC

system, this report, more than likely, would be prepared in an off-line operation.)

When the aged trial balance is run, the final total should equal the difference between total debits and total credits to accounts receivable; this difference is available from the control sheet. If the totals do not agree, all the transactions for the accounting period can be sorted into entry date sequence, summarized and checked against the daily entry totals on the con­trol sheet to isolate the entry date that is out of balance.

The Audit Trail 15

EXT SHANK WITH BRK sa SHANK RIGID BOL T . AND NUT SHANK RND SPR RING STEM

FREIGHT

sa SOCKET RIGID CUSTOM BUILT RND SPR RING STEM FLAT TOP SWIVEL

FREIGHT

EXTENSION SHANK ADJ ADAPTER ROUND BOL T AND NUT SHANK

FREIGHT

RT ANGLE HEAD STD PIPE STEM CUSTOM BUI L T

FREIGHT

FLAT TOP RIGID CUSTOM BU I L T FLAT TOP SWIVEL FLAT TOP RIGID CUSTOM BUILT

FREIGHT

EXT SHANK WITH BRK sa SOCKET SWIVEL FLAT TOP SWIVEL RND SPR RING STEM CUSTOM BUILT

FREIGHT

GENEIIIA ... MANUrrACTUIIIINO COMP"ANV

SAL.ES REGISTER

NO, •• , 'CV.T, A"iNCO V NO,

1 72 0 2 1123 07S1 31 2 11 0 2 1123 07Sl 31 3 21 0 2 1123 07~1 31 5 41 07 2 1123 07~1 31

2 1123 07Sl 31 221123 17S1 31

1 61 02 10052 07E 1 31 3 51 05 lE 3052 07E 1 31 4 41 04 lE 3052 07E 1 ~1 5 32 08 lE3052 07El 31

2 33 02 5 36 05 6 21 10

lE 3052 07E 1 31 lE 3052 07E 1 31

7805 06~ 231 7805e 0691231 7805 06~ 231 7805e 06S 231 7805e 06~ 1 31

1 42 02 lE305410761231 3 17 03 1E3054107E1231 6 51 12 lE 3054107<1231

lE 30541076 31 lE 30541 07E 1231

1 31 02 2=7355 04 1 31 1 51 02 2=7355 04 1231 5 32 08 2= 7355 04 1231 6 31 08 2=7355 044 231 6 51 10 257355 04 1231

~g;;; g~ 1m 1 72 03 2 149lC 05 1231 2 63 02 2 149lC05 231 3 32 05 2 149lC05 1231

: ~~ ~~ ~~~~~~i g; ~2;~ 22149lC 05 1231 22 49lC05 12 1

12351 12351 12351 12351 12351 12351

12352 12352 12352 12352 12352 12352

12353 12353 12353 12353 12353

12354 12354 12354 12354 12354

12355 12355 12355 12355 12355 12355 12355

12356 12356 12356 12356 12356 12356 12356

Totals are posted to the control sheet

from both daily registers

, , 1~2 1177 2169 :1)8 , I I

1~3 3j28 3151 ~5 , ,

1 , 1197 5'29 r,25 , I 1 , 188

2167 23~2 ,

I I , ,84

1121 4185 7148

11177 I I 1 , I

1162 2169

~~~ 11,77 ,

I 1 I I 1 I

a

a

a

IIIEP"OIllT NO, 1 DATE December 31

15 5

50 20

10 5

15 50

3 25 35

i , , , 24030 lo;l50

8'85 e67 134150 10~60 9'10 81168

, : 267r5 211145

151J0 1~25 1~40 11173 52165 42120

242rO 18120

, , 32t5 24~38*

9'85 7159 '132~5 101:88 25175 18T8

395185 29~95*

~g l~~g 1~~~~ 50 1196100 897100

i 1

75 75 45 35 45

75 45 40 50 75

1347'ro 101~98* 6~00 501L,8 9W5 72160

~~~6 ~~~~ 529i65 42:4

116*5* 90+5*

121~0 97~0 12W5 86158 116100 8~40 19ziso 144140 882175 '7060'73

, I , , 143~80* 1124iGl*

I , 7747,23 5943lo2 , , , , , ,

INVOICE. DATE

_'LLED

DK.IT A/III

.T MO. l,;, 15~5 16

12 I 10 ¥6S06

.2.. 814872:/ 1 1.2'" ~o

" " ~JS.33 7 50" '10 8 9091 1<1 9 5 '1313'

10 , 695.23

13 SI'l27 " III 7.:1.19 " 15 ,,190/~" I{, 71"51' 17 7 ,¥). II .2.0 7 '1(,1 12

.21 ~ (,0877 :1.2. , 950 I,

.23 1 :1.1/ '2

.1'1 7 '7' S('

.27 9301 8¥ .11 7 S7'1 57

J INVOICE.

,.AID

CIIIKDIT A/III

1/ Slf (,o

, flf '13 .2 OoS f-8

3 '5~ I). .2 '113 97

751.2.1

.2 71.:1. IS" 71'l1f-~~

1/ 89.1. '1'1 S Oft-IlI-

K "08' 7 /53 if

1.2 986 07

20 068 :lS :z 60706 aigso 90

S 178 '13 IS 372~9 1087(' 39

9SS' 07

:l' 719.25 I.H' 98fi ,2. .30 7 if 0). IS /5 '''7 to .31 7176'1 ~y 697S 07

l.JII \. ./ ...

"""""~NC. "",.-

67 :J..90 99

---FIgure 9. AudIt TraIl

16

....... : ...... ~

Check to Trial Balance

Incoming transactions listed in detail for permanent audit reference

ACCOUNTS RECEIVABLE

CONTROL SHEET

CA.1ot DI.COUNT

IIIr:CKIVKD ALLOWIED

DK.IT DK_IT

~ 1/73/9 551//

6 77'1 of t't J'S" I 9fl So /:1. /8 {,I gO

.3 633 57 .21 ;2.5

.2 358 VS 5SS;'

7if'!87 I 'II

"t 75/ 8'1 .30 31 6 7'i'f 70 1:.769 /I 1753 M 13$ ~3 .1. 77:- 3~ $0 bS )."/117 ! S'N03 13(" 13 7 037 195 Ills17J

I~ ~6'1 ,7Y 9b 0'1 J9 ~S'l 18'1 .30.1.'" :l 'It'.1.17o :IS $6 13150

..t 9Pb 10 7/133 .3 10'1 98 ,y 'Is

/4 st.;t ~ 30g ~8 /0 g).:t IS .5'1 M 9 1/1/"1 19'1 //1 /,3

917g5' If7 179 /,S IS 'Iii 0). :1.13 7Y 690'1- :1./ 708~

Ij

A •

1/0183

The transactions for that date are relisted; an entry-by­entry comparison on the duplicate and original entry registers will reveal the discrepancy so that a correcting entry can be initiated.

The sales register and cash receipts book provide documentation that is sufficient for reconstructing a

transaction or associating it with the original source document. Balancing each register to a predetermined total proves that all transactions in the group have been processed through that point. The entries on the control sheet provide the means for balancing account­ing records at the end of the accounting period .

DISK

STORAGE

MAGNETIC

TAPE

or

or

" ~ r

CARD FILE //1 t'-\ A/----R V

Open transactions balance to cont rol sheet totals at all times

o CENTAA~H~~~~~R~U~~~Y CHANE~ WHOLESALE

o ~~~~~~R~ N~ I ~upp co KEL.VINAIRE CORP

o ~:~~;NR;~~~I~~oC~o NEW MEXICO COMPANy

o ~E~T~~S S~~~L E~~C co WINTERDALE RAILWAY

o

.HceT 10 ... 5

cueTOMllfil HAMI:

AMERICAN STEEL CO

APALACH IN LUMBER CO

B J E SERVICE CORP

BARRETT MACHINE

BENSON MFG CO

BROWN AND WI LLIAMS

CASTLE HARDWARE CO

CENTRAL UNION SUPPLY

CENT RAL VALLEY CORP

C~ALLlS ALMERS

CHANEL WHOLESALE

WHITE STEEL BENCH CO

WINTERDALE RAILWAY

WISELOMANN INC

OCNl:fIIAL. MAHU ... ACTUfilINCI CO"" ........ " ... ~ .. T NO. 3 AGED TRIAL. BAL.ANCE DATil December 31

cueTo IHY. INV. TOTAL. CV ..... HT 10 DAve 10 DAve to DAY.

NO. DATI: NO.

I I

* I I I I

128 1 2 11666 64031 I

90<Jb4 128 1 30 12336 90~4 * 154'135

9°i4 217 15 9852 46~20 217 1 14 11609 1~;$~ I 217 1 30 12335 143~0

* 2l6~n 143~30

228 1 29 12332 147~78 1474,78

* 147~78 14778

30711 25 11717 587~5 30711 31 12347 610023 610~3

* 1197',38 610r3

412 1el8 10864 ~,58 412 1 4 11452 217149 I 412 1 2S 12319 119165 1191b5

* 1416;72 1191r5

619 1 1 11234 41"""0 194965 619 1 28 12321 194$5

* 2363145 1949p5 I

340~3 806 30 12338 34~3 * 34~43 340~3

13~0 825 11 2 11643 I

* 132080 I I I I

1072 1C 5 10514 62%3 ! 1072 11 0 11603 1~~~~ * 1 I

1190! LC 8 10901 6~~~~ I 1190 2 12290 637jo7

* 66'f0 637p7

1123 2 8 12324 80208 80~8 1123' 2 8 12324 ~~~~Cf ~~~~~CR 1123" 2 1 12351 1123' 2 4 99588 261~ 7Cf 261r 7CR

8628 5 12244 ;~~~ ;~¥~ * I

8765, I. 3 12228 598~5 5945

8821 5

* 59¥5 59~5

12240 90$6 90~6 * 903036 903036

I I I

j37982~3 672901)9 . ' .- : ", .... ;~ .. .. Check to

Control Sheet

I I I I I I -64931 I I

64~31 I I

I 46~20 2511 I

46<k0 25~1 I

I I

! I I

58~~ 587~~

I 158

21 tt i 7bs 217~

414~( I I I

I I 41f( I

I

i I I

13~C I I

132r I I

62963 38925

389t5 62963

2)"3 : I I 27~3

! ! :

I I

i I I i I I

I I I I I I I I I

I I I : I : I I I

I I I

I I

1690+9

I I 1022OP2 217S:05

: I I

Audit Trail 17

Maki~g Controls Work

In setting up controls that will operate successfully, the following should be kept in mind:

1. Only those controls which satisfy a need should be included.

2. The overall system of controls should be conceived and arranged for at the time procedures are being planned. In so doing, they will be an integral part of each procedure and those areas which may have a tendency to be overcontrolled or undercontrolled will be spotted.

3. Personnel who maintain the controls should be familiar with machine functions so as to be able to locate, determine the cause of, and correct out-of-bal­ance conditions.

4. Controls should be simple and easy to maintain so that work flow is not disrupted.

5. A description of control operations should be documented and assembled for reference and training purposes.

6. Whenever possible, control operations should be mechanized.

7. When documents to be processed are batched, batch size should be such that work will continue to flow steadily.

18

C20-8060

International Business Machines Corporation Data Processing Division 112 East Post Road, WhitePlains, New York 10601